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Big China Tech Feasts, as Startups Go Hungry

By Doug Young / Jan 15, 2020 12:27 PM / Business & Tech

Things may be rosy for big tech names like Alibaba and, but don’t tell that to China’s much larger field of high-tech startups.

The latest data are pointing to growing funding gap between the country’s tech giants and the lower-profile startups that are likely to produce the leaders of tomorrow. One new government survey shows that venture funding for Chinese tech startups plunged by 50% to just $6.84 billion in last year’s fourth quarter. The situation was already getting bad early in the year, with investment dropping by an even steeper 77% to $9.4 billion in the second quarter, according to an earlier Bloomberg report.

The situation is almost the opposite at the other end of the spectrum, with big-name tech having little difficulty raising funds over the last year. Alibaba led the way with its secondary IPO in Hong Kong last year, becoming one of 2019’s largest offerings when it raised around $13 billion in November. More recently, e-commerce rival raised $1 billion last week through a bond issue.

It’s not only the more established, profitable big names that are cashing in. Last week money-losing high-tech coffee maker Luckin announced plans to raise around $800 million through a bond and secondary share offering. And about a year ago, money-losing discount e-commerce specialist Pinduoduo also raised $1.4 billion through a secondary share offer after its 2018 IPO.

So what’s happening here?

In a nutshell, investors seem to be blowing off China’s high-tech future in favor of feasting on its more mature present. That’s probably not too surprising given the many uncertainties surrounding China’s economy right now.

The concurrent feast-and-famine probably also owes to differences between domestic and international investors. Venture capital that tends to fund startups is dominated by domestic firms that are facing cash shortages as China’s local funding sources become more conservative. But secondary offerings are happening in global markets where investors still have cash and are more confident of that the big names can survive the economic slowdown.

The bottom line is that China’s high-tech startups appear to be facing a funding winter. That means the startups of today are far more likely to be out of business two or three years from now than their predecessors from headier times.

To read the full column, click here.

Contact reporter Doug Young (

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